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Cable Conglomerates and Cuckoo Clocks

John Malone's Liberty Media gets a foothold in Switzerland.

Utilities can be strange businesses. It often takes a lot of money to build up enough infrastructure to be a player, and those years of losses can scare away investors. But once the gear is in place, it can produce robust cash flow. This has been true of power companies, gas companies, cable companies, and cell phone companies. I imagine it's also what we'll see happen at Liberty Global(NASDAQ:LBTYA) over time.

Right now, though, Liberty Global is still in the building phase. The company recently announced that it had agreed to acquire Cabelcomm, the largest Swiss broadband cable operator. Liberty will buy the company from an investor group for about $2.2 billion in cash, mostly funded by debt. The investors had been planning to take the company public and actually agreed to accept a price lower than the IPO pricing range that had been bandied about.

This deal will add another two million subscribers and give Liberty Global a leading position in 11 of its 14 European markets. On the surface, Liberty would seem to be paying a fair price, with an implied value of $1,100 per subscriber. That's a good deal, since Western European cable subscribers are often valued around $1,500 each.

With properties across Europe, Japan, and Latin America, Liberty Global certainly lives up to its name. Sure, there will be competition. There are satellite providers like SES Global and Eutelsat, broadcast TV companies like Central European Media(NASDAQ:CETV), SBSBroadcasting(NASDAQ:SBTV), and NHK, and pay-TV companies like Vivendi's (NYSE:V) Canal Plus. Still, there are plenty of euros, yen, and eyeballs to go around.

Investors should be aware that this is a relatively new company -- formed earlier this year in a merger of Liberty Media International and UnitedGlobalCom, both of which were spun off from parent company Liberty Media(NYSE:L). Furthermore, there are three classes of shares trading on the Nasdaq -- class A (LBTYA) with one vote, class B (LBTYB) with 10 votes, and class C (LBTYK) with no votes.

Looking at Comcast(NASDAQ:CMCSA), a cable company with a somewhat similar share structure, you see that the non-voting shares carry only a roughly 1.6% discount to the voting shares. In Liberty's case, the discount between Class C and Class A is more like 4.9% -- suggesting that investors looking at this company might be getting a slight relative bargain if they're willing to pass up voting privileges.